Regulatory challenges

Many regulatory changes challenge existing procedures and require adjustments to processes and calculation methods. Not every system is flexible enough to cope with changing demands. Adaptable and fast solutions are called for.

Find out how calculo can help you meet both existing and future regulations.

We help you future proof your system:

1. MiFID II

The Markets in Financial Instruments Directive (MiFID II) aims to make financial markets more efficient, resilient and transparent. Central to this is the strengthening of investor protection. This includes creating more transparency around third-party inducements received by investment advisors by requiring them to disclose these to their end-customer.

MiFID II: implications for financial institutions

1. Different treatment of independent and fee-based advice

The current draft directive regulates the acceptability of third party payments. Independent financial advisors are no longer allowed to receive third party inducements and must shift to a fee-based advisory model. In parallel dependent and commission-based advisory/sales models continue to exist. The (partial) abolition of trailer fees means that many investment companies have to rethink, or at any rate, adapt their fee models

2. Cost transparency and reporting at customer level

MiFID II requires investment firms to provide an exact breakdown of the cost of services rendered to their customers

The challenge

Many firms do not have a process in place that enables them to track and report exact costs at a customer level.

Our solution

Let us provide you with a centralised system to handle all your service fees.

calculo masters all fee structures related to independent and fee-based advisory. It enables you to manage and process all service fees through a single system. As calculo is based on a flexible, rules-based framework, the relevant department can react to regulatory changes immediately and adjust the software with little effort.

A new element of the UCITS V regulation is a general ban on outsourcing by custodian banks, with the exception of a defined catalogue of activities.

UCITS V: Implications for custodian services

Fund monitoring can no longer be outsourced. It has to be performed by the custodians themselves. Depending on the translation of the directive into national law, already the use of a management company provided system may be interpreted as outsourcing. Subsequently, affected custodians must monitor fees on their own systems.

The challenge

To establish an in-house fund monitoring system.

Our solution

calculo replicates the fee models of all management companies. The data is stored separately through a technical solution. This makes it possible to monitor all funds’ fees centrally, through a single platform.

Implications for management companies

When calculating performance-based fees, parameters such as the accounting period and the carrying forward of losses are prescribed.

The challenge

Some of BaFin’s guidelines are not formulated clearly

Management companies have to invest a lot of effort into interpreting the sample cost clause, in order to be able to implement it.

Depending on the starting position, significant changes may be required.

Our solution

In close cooperation with customers, Sowatec has developed an interpretation of the sample costs clause, in relation to performance-based fees. The result is a tried and tested standard model. Customers can use this model as a reference. This reduces costs and saves time.

4. Swiss Federal Supreme Court decision on retrocessions

The decision clarifies how to deal with potential conflicts of interest.

Implications for asset managers

Independent asset managers now have to disclose fees received from third parties.

The challenge

Assigning the exact fees to the customers’ respective portfolios is difficult, as many banks and asset managers receive third-party fees as a lump sum.

Our solution

Establish a single platform for customer and provider-side settlements, payments and reporting, by introducing calculo.

Because everything is on one platform, fee payments, for example, can be coupled to actual income or made subject to manual checks prior to release. Waivers are taken into account via exclusion lists.

5. Swiss Collective Investment Scheme Act revision (CISA)

The revised Collective Investment Scheme Act (CISA) intends to create the same standards as within the EU.

Implications for Swiss asset managers and custodians

• Swiss asset managers will in future be subject to a record keeping obligation

• Licensees will now have to disclose the amount and purpose of all direct and indirect fees to investors

The challenge

Many firms don’t yet have a process in place that enables them to track, aggregate and report exact costs at a customer level.

Our solution

• calculo automates the settlement of complex fees, as well as customer reporting